Connect with us

David Brown

By the Numbers: Jewelry-Store Sales Post a Record Drop

mm

Published

on

The decrease is blamed on election uncertainty.

The political uncertainty leading up to the November presidential election led to the largest single monthly drop in 12-month rolling average sales in our records. Year-to-date sales dropped 1.10 percent from September to October, translating into an annual decline of 13.2 percent if the trend were to continue.

This article originally appeared in the December 2016 edition of INSTORE.


business advice for jewelers from David Brown

Average store sales for October were $104,163, down from October 2015’s figure of $121,717, a significant 15 percent drop-off in the comparable monthly sales.

 

Advertisement
MTD
COMPARISION
October
2015
October
2016
Gross Sales $ $121,717 $104,163
Total Sale # 416 271
Avg. Sale Value
(incl. repairs)
$277 $349
Margin 46% 45%
Overall Gross Profit $ $55,666 $46,692
Percentage of
Annual Sales
8% 7%

 

Unit sales dropped an even more dramatic 35 percent between the two periods with a 26 percent increase in average retail value sold not being enough to make up for the decline. Margins slid 1 percentage point from 46 percent to 45 percent with gross profit falling 17 percent from $55,666 to $46,692. The overall contribution of October to annual sales dropped from 8 percent to 7 percent.

After a brief resurgence in 2014, unit sales have now dropped to a level lower than that being achieved in 2008 prior to the boom in the bead market.

However, is it all due to a fall in silver sales? True, they have declined, but sales of silver items are still well ahead of where they were in 2008.

As the data shows, despite the fall in total store units sold, and a recent decline in silver units, the average store is still selling around 2,400 silver units per year, up 72 percent on pre-recession numbers even if sales are down on the high of 3,600 units sold in 2014.

Gold is one area where the market appears to be shrinking in recent years. Our store data shows the typical store sold around 550 gold units per year in 2009 but this has now dropped to around 300 units in 2016. One factor could be the affordability of gold, with per ounce prices rising from around the $800-$900 range to $1,200-$1,400 during this time period. This has an obvious impact on jewelry wholesale prices, which translate into higher retail prices.

Advertisement

But is the increased price of raw materials really a major issue? When we compare the movement in silver sales and silver prices against the gold scenario, evidence tends to suggest this may not be the case. Silver prices moved from around $12 per ounce up to a high of around $30 per ounce before dropping back to $14 per ounce over this period. This curve almost exactly reflects the movement in sales with some of the highest volumes of silver sales occurring when the price was at its most expensive. Could the demand from jewelry buyers have driven the price rise? This seems unlikely as according to geology.com, jewelry represents only 6 percent of the market use of silver in the U.S., and figures would be similar for the rest of the world.

This increase shows that demand for silver jewelry occurred despite a price increase and this raises the question as to how price sensitive customers really are. Granted some jewelers will have absorbed part of the increase through their margins as the decline in markups shows, but not enough to take the majority of the hit.

As retailers it is easy to be price sensitive, fearing the reaction of customers to any increase in markups or prices. More often than not, however, I believe price increases are a bigger issue for the store owner than they are for the customer. We allow the markups we apply to be based on mathematical formula rather than the instrinsic perceived value to the customer. Every customer wants a good deal but price is only an issue in the absence of other variables. I recently spoke with a jeweler who provided a quote to a customer for a ring — along with 25 other jewelers. The customer made it clear that price was his main consideration but in the end when he weighed his final decision between my client and another jeweler he went with my client despite his price being slightly higher.

The cheapest price may start the conversation but other factors will ultimately dictate who closes the sale.

 


David Brown is president of the Edge Retail Academy. To learn how to complete a break-even analysis, contact inquiries@edgeretailacademy.com or (877) 569-8657.

Advertisement

Advertisement

SPONSORED VIDEO

When the Kids Have Their Own Careers, Wilkerson Can Help You to Retire

Alex and Gladys Rysman are the third generation to run Romm Jewelers in Brockton, Mass. And after many decades of service to the industry and their community, it was time to close the store and take advantage of some downtime. With three grown children who each had their own careers outside of the industry, they decided to call Wilkerson. Then, the Rysmans did what every jeweler should do: They called other retailers and asked about their own Wilkerson experience. “They all told us what a great experience it was and that’s what made us go with Wilkerson.” says Gladys Rysman. The results? Alex Rysman says he was impressed. “We exceeded whatever I expected to do by a large margin.”

Promoted Headlines

Most Popular